# Investing, I know that I should, but how? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [December 18, 2018, 1:04am UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298 "2018-12-18T01:04:02Z")\ **Posts on this page:** 18\ **Page:** 4
**Author:** ![justanothermike](https://avatars.discourse-cdn.com/v4/letter/j/c2a13f/32.png) [@justanothermike](https://boards.straightdope.com/u/justanothermike)\ **Post date:** [January 2, 2019, 2:55am UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/62 "2019-01-02T02:55:54Z")
Yep, my goal is to keep it in until retirement. I put it in a Roth IRA for just that reason. I get good at looking at money like it’s not mine to some degree as I have to withhold my own taxes from our cleaning business for quarterly tax payments, but this is the first time I’ve done the whole investing thing and it’s not easy to watch it go the wrong way right off the bat coming from where I come from. I’ll definitely keep at it. I know that it’s the right thing to do, I probably shouldn’t have even looked at the numbers but I did as part of an end of the year accounting that I do for myself. This was the first full year so I couldn’t help but notice. I don’t hang on the numbers constantly. Thanks for the reply. It helps me feel better as I don’t have anyone else to really bounce this stuff off of. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [January 2, 2019, 3:11am UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/63 "2019-01-02T03:11:20Z")
> [@justanothermike](#): > > If it does maybe I can spend the $6,000 I would have spent in 2018 plus the $6,000 I’ll spend in 2019 all in 2019 and get more bang for the buck by buying low. Another thing. It sounds from this that you’re investing the whole $6,000 all at once at year end, so the current amount was the contributions from 2017. You might instead contribute $500 each month to the Roth IRA, so your contributions aren’t all made at the same price. ---
**Author:** ![justanothermike](https://avatars.discourse-cdn.com/v4/letter/j/c2a13f/32.png) [@justanothermike](https://boards.straightdope.com/u/justanothermike)\ **Post date:** [January 2, 2019, 1:17pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/64 "2019-01-02T13:17:52Z")
Thanks Dewey. I believe that’s referred to as “dollar cost averaging”? I did some research on it but couldn’t conclusively prove that it was better over the long run (though I could see how it might feel better in the moment) as far as returns went. That’s if my memory serves. I know a lot of people swear by it. I could certainly go that route. I think something feels better to me about having that money sitting there as even an additional emergency fund during the year, probably just playing a lot of emotional games with myself out of a scarcity mentality. We humans are funny creatures. I’ll look into doing that again and see what I can find. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 2, 2019, 2:46pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/65 "2019-01-02T14:46:06Z")
> [@Voyager](#): > > Is your shift to more bonds a result of rebalancing as the result of equity prices climbing, or independent of this? Not sure exactly what you’re asking here, but it’s not an automatic rebalance of a passive fund. I actively sell higher risk funds and move into lower risk ones. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [January 2, 2019, 2:51pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/66 "2019-01-02T14:51:39Z")
> [@justanothermike](#): > > Thanks Dewey. I believe that’s referred to as “dollar cost averaging”? Yes, it is. Over the long run (in your case, 25 years or so), it may not make a difference. And another thing; you said that you thought of the uninvested money as an emergency fund. Well, you should have that set aside before you invest. And remember that you can pull money out of a Roth IRA. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 2, 2019, 2:55pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/67 "2019-01-02T14:55:38Z")
> [@Riemann](#): > > You claim that you can see major declines coming, Well, not exactly. I am not a mystic. I read the opinions of more informed people, I keep an eye on events, and I act when those signs seem to be incredibly obvious to everyone (or should be). I don’t see things that anyone else doesn’t see. > [@](#): > > and that your strategy is to exit the market at those times and re-buy after the decline. So _relative to a passive strategy that is always invested in stocks_ that’s obviously logically exactly equivalent to claiming that you can make money consistently over time by shorting the stock market when you anticipate a decline is imminent, and covering your short some time later. No, it’s not logically exactly equivalent. Shorting has a finite upside, but an infinite downside. You are exposed to theoretically infinite losses if you don’t time the rebound exactly right. That’s risk I don’t need, so I don’t do that. I expect you already know this, so let’s try to stay out of strawman territory by suggesting I’m doing things that I’m not (or their “logical exact equivalents” that aren’t actually equivalent). ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [January 2, 2019, 4:00pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/68 "2019-01-02T16:00:16Z")
> [@HMS\_Irruncible](#): > > No, it’s not logically exactly equivalent. Yes, it is exactly equivalent. Your strategy is to sell when you think a decline might be coming, and to buy back some time later. What matters is not your absolute performance, but whether you can _outperform_ a passive strategy of remaining invested in stocks all the time. It is trivially true that when you sell you have a _relative_ short position when compared to that passive always-long strategy. > [@HMS\_Irruncible](#): > > Shorting has a finite upside, but an infinite downside. You are exposed to theoretically infinite losses if you don’t time the rebound exactly right. That’s risk I don’t need, so I don’t do that. That’s exactly the point. _Relative to a passive always-long strategy_ you are selling short, and to restore your exposure you must eventually buy back. You may sometimes be able to do that when the market is lower; but sometimes you will misjudge the market, it will rally after you sell, and you will be forced to buy back into the market at much higher levels. The obvious recent example is people who panicked in 2008 and sold. Some of those people have _still_ not re-entered the market after it has since tripled. > [@HMS\_Irruncible](#): > > I expect you already know this, so let’s try to stay out of strawman territory by suggesting I’m doing things that I’m not (or their “logical exact equivalents” that aren’t actually equivalent). You need to think about this more carefully. It is trivially true that in order for your strategy to outperform a passive always-long strategy, you must show that you can make money consistently over time by selling the stock market short and later covering your short. ---
**Author:** ![justanothermike](https://avatars.discourse-cdn.com/v4/letter/j/c2a13f/32.png) [@justanothermike](https://boards.straightdope.com/u/justanothermike)\ **Post date:** [January 2, 2019, 5:30pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/69 "2019-01-02T17:30:47Z")
> [@Dewey\_Finn](#): > > Yes, it is. Over the long run (in your case, 25 years or so), it may not make a difference. And another thing; you said that you thought of the uninvested money as an emergency fund. Well, you should have that set aside before you invest. And remember that you can pull money out of a Roth IRA. Thanks again Dewey. I do have an emergency fund, but when in scarcity it can never be too large. I live one month ahead on all bills plus I have an emergency fund. I also live one year ahead on the “misc” portion of my budget. I’ve worked on this for years. I think 2013 was when we paid off our last debt other than the house, and we owe just over half of what that’s worth and are working it down. Growing up poor, plus being shunned and knowing we have no family to turn to if shit hit the fan lends me toward creating many safety nets. I have separate accounts for my emergency funds and my investing funds with no cards or checks linked to either. I keep things as separate as possible. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 2, 2019, 6:38pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/70 "2019-01-02T18:38:21Z")
> [@HMS\_Irruncible](#): > > Not sure exactly what you’re asking here, but it’s not an automatic rebalance of a passive fund. I actively sell higher risk funds and move into lower risk ones. Doesn’t have to be automatic. Let’s say that you decide that you want to keep 40% of your investments in bonds and 60% in equities. Say that equities double in value for the year and bonds stay constant. If you had $100 K originally, you now have $160K, with 75% equities and 25% in bonds. Rebalancing would have you sell $24K of equities and buy bonds, which would restore you to your goal. Target date funds do this automatically, I think, but if you have another type of investment set you have to do it yourself. All numbers are chosen to make things easy to calculate. Around here there seems to be a trend of index funds and nothing else. All your equities can be index funds, no problem, and if someone has only a bit to invest they make good sense, ditto if you are 25, but as time goes on I think people should diversify. As I said, I more or less did what you did, but also for income. I don’t consider that rebalancing, since even lower risk funds can be riskier than bonds or cash. ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [January 2, 2019, 7:54pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/71 "2019-01-02T19:54:13Z")
> [@justanothermike](#): > > I am working this year on trying to squeeze more savings out of our budget and trying to get that working even better. If anyone sees a fatal flaw in what I wrote above please let me know. I’m trying to do my best to make the wisest decisions I can for my wife and I, save on fees, and make every dollar that I can stretch because I’m starting late and somewhat limited. I think you’d be much better off requesting advice at [Bogleheads.org](http://Bogleheads.org). I’ve followed that forum and its precursors ([Diehards.org](http://Diehards.org), Morningstar’s Vanguard Diehards forum) from the time I received my first paycheck 20 years ago. Like all online forums they occasionally veer toward zealotry (e.g. years ago many of them eschewed both international investing and ETFs because Jack Bogle was opposed to them, and Bogle is absolutely beyond reproach), but you can still learn a lot there. ---
**Author:** ![justanothermike](https://avatars.discourse-cdn.com/v4/letter/j/c2a13f/32.png) [@justanothermike](https://boards.straightdope.com/u/justanothermike)\ **Post date:** [January 2, 2019, 9:33pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/72 "2019-01-02T21:33:55Z")
Thanks Surreal, I’ll check it out. I’m familiar with the name. I can handle some zealotry. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [January 2, 2019, 9:50pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/73 "2019-01-02T21:50:54Z")
> [@justanothermike](#): > > Thanks Surreal, I’ll check it out. I’m familiar with the name. I can handle some zealotry. Here is a link to their Wiki - [Bogleheads](https://www.bogleheads.org/wiki/Main_Page) and links to a very popular investing strategy (that I like and follow). [https://www.bogleheads.org/wiki/Three-fund\_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio) [https://www.bogleheads.org/forum/viewtopic.php?t=88005](https://www.bogleheads.org/forum/viewtopic.php?t=88005) ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 3, 2019, 1:38am UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/74 "2019-01-03T01:38:00Z")
> [@Riemann](#): > > You need to think about this more carefully. It is trivially true that in order for your strategy to outperform a passive always-long strategy, you must show that you can make money consistently over time by selling the stock market short and later covering your short. ‘Selling short’ is borrowing shares and them selling, hoping they will go down. At best you can double your money, at worst you could actually end up owing far more than you actually invested. So you absolutely must pick a point to cover, otherwise you’re in a world of pain. This is entirely different from ‘not having a position’, where capital is not at risk, and you face only opportunity cost (which is almost certainly not infinite). If you are trying to insist that ‘selling short’ is the same as ‘not having a position’ or ‘investing bearishly’, then I don’t know how to continue that conversation because that’s not what those words mean. Anyway, I’m satisified that I’ve hijacked this thread enough for now. Final advice, FWIW, 2019 is probably not the best long entry point you’ll see in your life. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [January 3, 2019, 2:09am UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/75 "2019-01-03T02:09:05Z")
> [@HMS\_Irruncible](#): > > ‘Selling short’ is borrowing shares and them selling, hoping they will go down. At best you can double your money, at worst you could actually end up owing far more than you actually invested. So you absolutely must pick a point to cover, otherwise you’re in a world of pain. This is entirely different from ‘not having a position’, where capital is not at risk, and you face only opportunity cost (which is almost certainly not infinite). > > If you are trying to insist that ‘selling short’ is the same as ‘not having a position’ or ‘investing bearishly’, then I don’t know how to continue that conversation because that’s not what those words mean. > > Anyway, I’m satisified that I’ve hijacked this thread enough for now. Final advice, FWIW, 2019 is probably not the best long entry point you’ll see in your life. A short position simply has the opposite economics to a long position. A long position plus a short position = flat (no position). When you adopt your active strategy to sell your stocks when you think the market is going down, your _absolute_ position is now flat. But if the benchmark against which your performance is measured is a passive always-long position, then _relative to the benchmark_ you are short. You’re denying that +1-1=0. If you don’t understand the markets well enough to see that the _relative_ performance of your active strategy is equivalent to active short-selling, perhaps you should stop doing it? In any event, it is absolutely the opposite of good advice to be telling any investor to trade actively, or to try to time the markets by buying and selling in any discretionary way. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [January 3, 2019, 3:32pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/76 "2019-01-03T15:32:40Z")
> [@Riemann](#): > > In any event, it is absolutely the opposite of good advice to be telling any investor to trade actively, or to try to time the markets by buying and selling in any discretionary way. I disagree. As Warren Buffet says “buy when everyone else is scared, sell when they are confident.” As was said upthread, it is true that bull markets don’t last forever, and that markets recover. But unless you are going to borrow to play the stock market (bad idea) you need cash to take advantage of a drop - and one way to get that by selling in a bull market. I wouldn’t day trade, and the index funds stay put, but I haven’t actively bought much for about two years - and when a conflict of interest had me selling Amazon (my husband got a new job), I hung onto the cash. Right now, I’d rather have cash. Life - and the stock market - feels uncertain. (I wouldn’t have sold the Amazon if I hadn’t had to through). But I haven’t touched the index stocks or my retirement funds or the kid’s aged 529s. I actively trade the stuff I actively trade. About 1/3 of a large portfolio that is functionally play money. It really depends on what you are doing with the market. If you are in fact “playing” the market - then you trade more actively. To me, some stock purchases are just purchases - I own them to own them and will sell them when I get tired of owning them. I don’t do that with money I need - its like “stock or a new purse” - i.e. money that would go to books or jewelry or shoes or tea or something to put on the coffee table. Fun money. But that is a whole different way than using the stock market to invest money you will actually want to use in the future. There is a lot of other money - the majority of it - retirement money, college money - that is held in low fee index funds on a “buy regularly, hold irregardless” strategy. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [January 3, 2019, 3:45pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/77 "2019-01-03T15:45:52Z")
double post ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [January 18, 2019, 3:32pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/78 "2019-01-18T15:32:07Z")
We lost Jack Bogle of Vanguard fame this week. Today, the Times had a short article listing five of his bits of investing advice. A synopsis is quoted below, the full article is [here](https://nyti.ms/2HhJZEE). > [@Jack Bogle](#): > > **1. Stay the course** > > “Wise investors won’t try to outsmart the market,” he says. “They’ll buy index funds for the long term, and they’ll diversify.” > > **2. Beware the experts** > > Money managers missed all the warning signs before the 2008 financial crisis, Mr. Bogle noted. > > In 2017, he waved younger investors away from financial advisers and gave his approval to robo-advisers. “Unless you need a financial adviser to help you get started in that routine, you probably don’t need a financial adviser at all.” > > **3. Keep costs down** > > Vanguard’s fund shareholders own it collectively, so there is no parent company or private owner to siphon profit, allowing the firm to keep costs down. > > Mr. Bogle became a harsh critic in his later years of the mutual fund industry and the high fees charged to investors for stock-picking expertise. > > **4. Don’t get emotional** > > Invest in a diverse selection of stocks and bonds, trust in the arithmetic and stick to it — this was the essence of Mr. Bogle’s advice for Vanguard investors. “Impulse is your enemy,” was one of the mantras. > > **5. Own the entire stock market** > > Mr. Bogle was the leading proponent of structuring an investment portfolio to mirror the performance of a market yardstick, like the S&P 500 stock index. He hadn’t bought an individual stock in about 25 years. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [January 18, 2019, 3:48pm UTC](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298/79 "2019-01-18T15:48:24Z")
Another article about Jack Bogle that is worth a read. [Lessons From the Conscience of Financial Services](https://nyti.ms/2Hlxs2W) > [@](#): > > So many people have John Bogle stories. > > For some, it is a chance encounter at a conference and a whispered word of advice. For others, it is a formal meeting. In one case, it was an airplane day trip and train ride just to meet the man. [Previous page](https://boards.straightdope.com/t/investing-i-know-that-i-should-but-how/826298.md?page=3)